What happened

Alibaba (BABA 0.28%) stock continued to spiral in September as investors responded to an increasingly difficult regulatory environment. Concerns about Chinese real estate giant Evergrande going into default also spooked Chinese stocks.

As a result, Alibaba stock finished the month down 11%, according to data from S&P Global Market Intelligence, and you can see from the chart below that the stock fell steadily over most of the month.

BABA Chart

BABA data by YCharts

So what

Alibaba shares began to decline once the Evergrande news hit the market, sending Chinese stocks down broadly. However, Alibaba shares continued to slide as the company adjusted its business in a number of areas to please Beijing, which is implementing different policies to encourage more competition that's directly impacting Alibaba. On Sept. 13, The Financial Times reported that Chinese regulators are seeking to break up Ant Group's Alipay, the payments app in which Alibaba has a 33% stake.

A rock outside an office with the Alibaba logo on it

Image source: Alibaba.

The following week, the company said it would sell its 5% stake in Mango Excellent Media, a state-owned broadcaster, due to regulatory pressure on the company to divest from most of its media holdings.

Toward the end of the month, Alibaba also added Tencent's WeChat Pay to some of its apps, responding to Beijing's call for more interoperability between big tech companies in order to benefit consumers. Along the way, several analysts lowered their prices on Alibaba in response to the deteriorating regulatory environment.

Now what 

October isn't looking any better for Alibaba so far, as the stock is down 5% in just the first two sessions of the month, in part on a downgrade at Raymond James from strong buy to outperform due to an expected slowdown in e-commerce growth.

Alibaba is facing a wide range of headwinds, including on the regulatory front, with the broader impact of the potential Evergrande collapse on the Chinese economy, and slowing growth in its own business.

The stock looks like a bargain, but that hasn't mattered for the last year. While that could change, the perception of the investing environment in China will have to improve first.